China will force 67,000 fossil fuel-powered Taxis to switch to electric in order to cut back on pollution

Beijing is notorious for being one of the most polluted cities in the world. Smog alerts are a common affair and last winter there were more than a dozen days when life-threatening particle matter measured in the air was 10 times over the limit determined safe by the World Health Organization. To tackle rampant air pollution as a result of China’s accelerated economic growth based on burning gargantuan quantities of fossil fuels, the local government has enacted several desperate measures. One recent mandate will force thousands of taxi drivers to switch to electric vehicles or else they risk having their licenses withdrawn.

Some 67,000 of Beijing’s 71,000 taxis currently run on gasoline, diesel, or liquefied gas. According to a draft work program on air pollution control for Beijing, Tianjin, Hebei, all of these vehicles will gradually have to switch to electric.

The timeframe isn’t clear as of yet, but it the whole mandate will reportedly cost taxi companies nine billion yuan (1.3 billion US dollars). In China, the market price for a typical gasoline-powered vehicle is $10,000 but an electric car can cost twice as much. The government is lending a hand, though.

China is the largest EV market in the world with more than 400,000 units sold in 2016, January to November. By 2020, the Chinese government wants to see five million EVs on its streets and is offering subsidies that in some instances can amount to more than 70% of the EV’s market price. For instance, the two-door battery electric Chery eQ costs around 60,000 yuan ($8,655) after subsidies worth 100,000 yuan or so.

The same subsidies, however, have provided a perverse incentive for fraud. There are more than 200 EV manufacturers in China, most of them popping up in the last five years. As you might imagine, the vast majority don’t meet the strict quality guidelines required to make a Chinese EV competitive with the likes of Tesla or General Motors. With this in mind, since January 2017, subsidies at local-government levels have been capped at 50 percent of that offered by the central government.

“In the long term, this is going to help the industry to develop in a healthy way, but in the short term it’ll put pressure on even the big manufacturers,” Ka Leong Lo, Hong Kong-based analyst at Maybank Kim Eng Securities, told China Daily.

“The reason the ministry is putting a cap on local government subsidies is mainly because it wants to weed out frauds.”

Even with this cap, the subsidies are still generous which shouldn’t be that much of a hassle for Chinese taxi companies. What will be problematic, however, will be the charging stations which Beijing woefully lacks. In 2014, when only 200 electric cabs were added to the Beijing fleet, many drivers complained queues could last for up to six hours. The 172 charging facilities in Beijing as of the end of 2015 had performed over two million charges, according to the Beijing Electric Power Company. Beijing would have to add at least 100 times more to accommodate this new mandate.